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Should a Mac user browsing a travel website pay more for a hotel than her PC-using counterpart?

Is it plausible for an airline to charge a frequent flyer more for a plane ticket - because in all likelihood the travel is for business?

Can a supermarket reduce the price of eggs for someone on a high-protein diet?

How would an office supplies retailer give a discount to customers in close proximity to its store locations?

In an age where standardized, "one price for everything"-style pricing reigns supreme, it seems unlikely that a business could offer one price to a certain group of customers while charging others something different. But as online retailers gain access to an increasingly seductive amount of consumer data, they've acquired the ability to generate a unique price for each customer. Investors need to watch who is doing this well – and how.

Business of Fashion likened this to the pricing modelsseen in ancient bazaars. Rather than charge everyone the same price, merchants would look at their patrons, size them up, and decide what to charge them on an individual basis. Today's e-commerce retailers can do the same thing, though rather than relying on intuition, they use the sizable data trail each customer leaves behind as a result of their previous purchases. Browsing habits, demographic characteristics and a wealth of other relevant data points are aggregated to determine what that customer can be charged.

This is known as dynamic pricing, and it has the potential to widen profit margins considerably for those retailers that can implement it effectively. This should have the attention of investors as margins in the retail sector are often thin, and the companies themselves rely on high sales volumes to stay profitable. Companies that are taking advantage of the profit-boosting capabilities of dynamic pricing are sure to see their stock value increase accordingly.

So how does dynamic pricing actually work, and why exactly should a retailer engage in it?